Russian power has always sat on a contradiction. The country can put satellites into orbit and tanks across borders, but it cannot build a normal economy.
Helmut Schmidt caught the contradiction in the 1970s when he called the Soviet Union “Obervolta mit Raketen,” Upper Volta with rockets. The line was brutal then, and it has aged well (even though Upper Volta is now called Burkina Faso).
Vladimir Putin has been trying to prove Schmidt wrong since at least 2014, when Russia annexed Crimea. The full invasion of Ukraine in 2022 was meant to be proof that Russia could absorb sanctions, mobilise industry, outlast Ukraine and still have a strong economy.
For a while it looked as if Russia might. War spending lifted growth, soldiers’ wages lifted consumption, and factories producing shells and drones worked around the clock.
But over time, the limitations were becoming hard to hide. Russia’s growth slowed sharply, and the liquid part of the National Wealth Fund, Putin’s usable rainy-day reserve, was being drawn down.
Interest rates remained punishingly high even after repeated cuts, and the government lifted VAT from 20 to 22 percent. Sanctions also began to bite, the war became harder to finance, and Ukrainian drone strikes on Russian energy infrastructure added physical damage to financial pressure.
It did not look good for the Russian economy. But then Donald Trump went to war with Iran.
As a result of the blockade of the Strait of Hormuz, Brent crude jumped from the low $70s to over $110 a barrel within weeks.
Most oil importers panicked, but the Russians could not believe their luck. Russia is an oil state, and energy revenue pays for pensions, for soldiers, for police, for prison guards. It also pays for the invasion of Ukraine.
Trump’s Iran war thus did for Putin what Moscow could not do for itself. It pushed up the price of Russia’s main export just when Russia needed the rescue most. Time is the only resource a regime under pressure cannot manufacture for itself.
Still, Russian officials, trained in the art of denying the obvious since Soviet times, sounded unusually nervous even with the windfall flowing.
Economy minister Maxim Reshetnikov admitted that reserves had been “largely used up”. Communist veteran Gennady Zyuganov warned the Duma that without urgent measures Russia could face “a repeat of 1917” by the autumn. He meant revolution.
Now, Zyuganov is hardly a revolutionary. He is a seasoned opposition politician who still supports Putin’s war. When people like him express concerns publicly, they should be taken seriously.
Swedish military intelligence has assessed that real Russian inflation may be closer to 15 percent than to the official figure of around 6. This inflation eats into pensions, soldiers’ bonuses and the quiet bargain by which ordinary Russians traded their liberty for economic stability. When that deal breaks, Putin will have a problem.
Of course, none of this means Putin is about to be toppled. Western commentary has predicted Russia’s imminent collapse too often before and underestimated the control Putin exerts, even with his country suffering due to his policies. But there are limits even to Putin’s control.
To keep control, Putin requires a Russia solvent enough to pay soldiers, replace equipment, import sanctioned components and suppress dissent. A few extra months of oil revenue can matter more to him than a decade of reform would have mattered to a normal economy.
This is where the Iran war comes into the picture. Trump may have treated Iran and Russia as separate problems. But there are multiple connections between them.
Tehran has long supplied Moscow with drones and munitions for use against Ukraine. Moscow, meanwhile, has often supplied Tehran with air defences, technology and some diplomatic cover. It has been a transactional relationship between two very different regimes, but it worked for both.
While Trump may have thought his war was with Iran, Putin quickly understood how an attack on Russia’s ally would still work for him: through higher oil prices, a distracted America, a Europe absorbed by another crisis and a Ukraine that grows weaker every month the West’s attention is elsewhere.
This windfall will not fix Russia in the long run. It cannot conjure workers out of thin air, repair refineries hit by Ukrainian drones, or undo years of capital flight. It can only make a war economy survivable. But for a regime grinding through a long war, that is the most important thing.
For Ukraine, the difference between a weakening Russia and a temporarily refinanced Russia is measured in lives, territory and destroyed cities.
For us in New Zealand, both Hormuz and the Donbas seem far away, and it is tempting to treat these conflicts as discrete events, with Iran in one box, Ukraine in another and Russia somewhere offstage. But that is not how autocrats see it.
They learn from one another, trade weapons and technology and profit from Western distraction. They do not need to be allies in the traditional sense. They just need the West to make their lives easier.
Trump has now done that for Putin, probably without meaning to.
The American president who spoke most loudly about ending Russia’s war in 24 hours has now helped pay for its continuation. Not by signing a cheque or embracing Putin on a stage, but by pushing the world’s most important commodity market in the one direction Moscow needed. And with that, he has stabilised Putin’s grip on power.
Helmut Schmidt’s line still applies. Russia remains Upper Volta with rockets. But rockets are expensive, and so are trenches, drones and occupation armies.
Briefly at the beginning of this year, it looked as if the bill for Russia’s militarisation was finally coming due.
And then Trump helped Putin pay it.
To read the article on the Newsroom website, click here.